Export supply of goods or supply of goods in the course of export of the goods, and export of goods are not one and the same. For the purpose of Integrated Goods and Services Tax Act, 2017 (hereinafter referred to as the IGST Act), in clause (5) of section 2 of the said Act expression “export of goods” has been defined as follows:–
“(5) “export of goods” with its grammatical variations and cognate expressions, means taking goods out of India to a place outside India;”
Suppose a foreign tourist visits India. While visiting Taj Mahal at Agra, he makes a purchase of small statue of Tajmahal, made of marble stone, from a supplier located at Agra. Sometime later when he leaves India for his own country, takes the statue with him. Taking of the statue by foreign tourist from India to his own country amounts to export of statue out of India to a place outside India. In this case, statue supplier has nothing to do with export of statue. Here event of supply of statue and event of export of statue are two independent events. This is a case of export of goods.
Let us take another case of purchase of statue of Taj Mahal by the same tourist from the same supplier. The tourist expresses his desire to purchase the statue if the supplier agrees to deliver the statue by mail services to him in his country at the given address. The supplier gives his consent. The tourist asks the supplier to tell him the price inclusive of freight charges. After settlement of price, the tourist pays the price of the statue to the supplier. This is a contract or an agreement of supply of statue of Taj Mahal in between the supplier and the tourist. Thereafter, the supplier sends the statue by postal mail for delivery to the tourist at the place, located outside India. Here in this case, supply of statue (delivery of statue to the tourist) and sending of statue to foreign destination given by the tourist, both, constitute a single transaction. In this case, contract of supply cannot be completed in absence of export. In this case, sale of statue (transfer of property in statue) and export of statue to foreign country are so integrally connected that they cannot be dissociated from each other. Non-compliance of any of them will amount to breach of contract. In layman’s language, such type of sale or supply is referred to as the export supply. For such a supply, legal term, as used in Article 286 of the Constitution”, is “supply of goods or services or both in the course of export of the goods or services or both out of the territory of India”. Use of words “in the course of” in between the expression “supply of goods or services or both” and expression “export of the goods or services or both out of the territory of India” indicates that both expressions viz. (i) “supply of goods or services or both”, and (ii) “export of the goods or services or both out of the territory of India”, are so integrally connected with each other that they form a single transaction and they cannot be dissociated from each other.
It is interesting that under “supply of goods or services or both in the course of export of the goods or services or both out of the territory of India”, supply of goods starts with earmarking of goods towards the contract of the supply, much before the start of export journey of goods. Supply of any goods in the course of export out of the territory of India, can also be effected by transfer of document of title to the goods after the goods have crossed the customs frontiers of India. Here sale or supply is made during export journey of goods. Such supply also takes place in the course of export. Such supplies are commonly referred to as high sea sales.
What has been defined in clause (5) of section 2 of the IGST Act is “export of goods out of India”. The definition talks about export journey, it does not talk about supply. Expression “export of goods” has been used in clause (a) of sub-section 16 of the IGST Act as follows:–
“(a) export of goods or services or both;”
Here, use of words “export of goods” is legally incorrect. GST Laws have been enacted to provide levy and collection of goods and services tax on supply of goods or services or both and have not been made to deal with export or import of goods or services or both. Goods and services tax (GST), in itself, is a tax on supply of goods or services or both. In clause (a) of sub-section (1) of section 16 of the IGST Act, it would have been legally correct to use the expression “supply of goods or services or both in the course of export of the goods or services or both out of the territory of India”. In clause (a) of sub-section (5) of section 7 of the IGST Act, the said supply has been referred to as “supply of goods or services or both when the supplier is located in India and the place of supply is outside India”. Here also supply has not been described properly.
I will like to express my views separately on import supply or supply of goods or services or both in the course of import of the goods or services or both into the territory of India. About the expression “in the course of”, learned readers of this article, may read my article with title “Expression ‘In the Course of’ in GST Laws“, published here on this website “taxguru.in”.
Disclaimer: Except the quoted versions, interpretations made and all other views expressed here are my personal views and are meant only for academic discussion. Readers are advised to follow the provisions of the law and to seek opinion of their legal advisors before acting upon the views expressed here. I and the publishers of this article disown any liability on account of any loss or damage that may be caused on account of use of views expressed here.